Jury out on EU's high-speed Internet plan

The telecoms industry is not convinced that the EU has found the right solution to spur investment in next generation networks like fibre cables, as draft documents seen by EurActiv unveil the European Commission's plan for high-speed Internet.

New entrants worry they will be priced out of the market, while dominant players argue that vital upgrades from copper wire to fibre lines involve risks which should be factored in to access costs for newcomers.

Lobbyists have been poring over drafts from the Commission since early this year to find out whether the EU's commissioner for the Digital Agenda, Neelie Kroes, will do a better job than her predecessor, Viviane Reding, whose own proposal fell due to industry criticism (EurActiv 15/06/09).

On the face of it, large networks are making little noise about the recommendation, while speculation in Brussels is rife that there is some last-ditch lobbying to delay its publication.

A Commission official denies this and says the document will be published on Monday 20 September.

There are some minor wins for large network operators in the document, which allows dominant players to factor the cost of investment into fibre-cable into their pricing models for new entrants' access to their networks, according to the draft seen by EurActiv.

Sources also say they are pleased that the document reinforces geographic segmentation of markets: that is, that regulators can relax rules in areas where there are fewer competitors.

But smaller operators argue that rules on pricing flexibility for large incumbents risk tipping new entrants over the edge.

"The jury is still out on whether the pricing arrangements will allow competitors to flourish," Ilsa Godlovitch, director of the European Competitive Telecoms Association, told EurActiv.

Godlovitch argues that there is a danger that the pricing models are wrong and that new entrants will be tipped over the edge.

She points out that investments in fibre are happening in many member states, like the UK and the Netherlands.

"Listen, there is no doubt that investment will happen. It is already happening in many member states. The question we should be asking is: will consumers still have a choice of broadband provider as the upgrades are made?" Godlovitch stressed.

Other industry stakeholders did not want their comments on the recommendation to go on the record.

"It is not unreasonable that the costs involved in networks reflect the price paid for networks," an EU source insisted, endorsing Commissioner Kroes' pricing arrangements.

"If we cannot get a return, we are not going to spend the money. It is as simple as that," an industry source added.

The NGA recommendation has been a lobby-heavy deal, with network operators getting a bad reputation for trying to bend the ears of Commission officials and MEPs.

In July, Deutsche Telekom reportedly tried to convince centre-right German lawmakers in the European Parliament to derail the package by questioning the Commission's right to implement it.

A recommendation from the European Commission should not overstep the body's implementing powers and the Parliament has a right to stop the Commission in its tracks if it thinks the body is going beyond its legal muscle.

Though the European People's Party reportedly took Deutsche Telekom's bait, it was outvoted by other political groups and the recommendation was allowed to go ahead.

Another industry source claims that in order to secure Angela Merkel's vote for a second term as president of the European Commission, José Manuel Barroso allegedly was asked to agree to give Deutsche Telekom regulatory holidays.

The NGA recommendation's publication on the 20th will be accompanied by two other papers, one on how the EU will reach its ambitious broadband targets and the other on how the scarce spectrum carrying the Internet can be shared by competitors.

All three documents have been deigned to go hand in hand as they are all part of Commissioner Kroes' strategy to get the EU from second-rate to first rate connectivity.

Background

As demand for the Internet rises by 50-60% annually, the EU has been trying to hatch a plan to facilitate investment in fibre networks to espouse more competitive markets in the first instance and higher Internet take up in the second.

Optical fibre backbones are considered the future of telecommunications infrastructure, because they allow faster and wider transmission of data than current, largely copper-based networks. Fibres are at the core of so-called 'Next Generation Networks' (NGNs).

Fibre networks have been deployed slowly across the EU so far, covering a marginal share of national markets. NGNs today only account for around one million subscribers in the EU, compared with three million in the US and 11 million in the most-developed Asian countries, primarily in Japan and South Korea.

Investment in Europe is currently low. To upgrade EU networks, at least 300 billion euros of investment will be necessary, according to estimates by McKinsey, a consulting company.

Timeline

20 Sept.: Publication of Next Generation Access Networks, the Broadband Communication and the Radio Spectrum Policy Programme.

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